Tag Archives: budget

Trying your best to balance the Federal Budget with a limited number of Tax Dollars—and doing so while visibly displaying great compassion for your fellow citizens in the hope they might reelect you—requires some very special thinking skills. These unique skills of rational analysis and gentle compassion were on display recently when Congressman Paul Ryan gave a speech to the Conservative Political Action Conference laying the ground work for his forthcoming efforts to cut the deficit by “reforming” the welfare system.

The New York Times Incompetence in Macroeconomic Reporting (IMR) Award

I have written repeatedly about the New York Times’ needs to create a prize in incompetence in macroeconomic reporting (IMR) and suggested that the paper award the IMR prize to its reporters. I suggested that the prize consist of a two hour lunch with Paul Krugman in which he will provide them with a remedial lecture on why austerity is an economically illiterate response to a recession.

NYT columns discussing austerity, particularly in the eurozone, demonstrate that its reporters religiously avoid reading Krugman’s scores of columns on austerity. As always on this subject, I want to make express that I don’t insist that the reporters agree with economics. It is fine for reporters to state that economics has known for 75 years that austerity is a self-destructive response to a recession but that some economists disagree. It is fine for the reporter to explain why he agrees with the austerian economists. It is not acceptable journalism to ignore the dominant economic view, 75 years of supporting events, and the empirical studies by austerians (the IMF) finding that fiscal changes have more powerful effects on the economy consistent with the dominant theory. It is not acceptable journalism to ignore unemployment and inequality and the role of austerity in increasing both. I end by expanding on Krugman’s column about a tragic financial media meme by discussing three related memes that are causing great harm.

Deficit spending by the government is merely the counterpart of private sector saving. What government deficit spending does is to permit the private sector to achieve its level of desired saving. When the latter changes, government spending ought to be adjusting in the opposite direction to offset it (unless the current account balance happens to do the job).

The Office of Management and Budget (OMB) is every administration’s heavy artillery on budget issues. OMB’s staff is dominated by neo-liberal micro-economists under every administration, so it is institutionally conservative. OMB personnel obtain promotions by killing programs, cutting spending, and either blocking the adoption of regulations or weakening the regulations. OMB is institutionally predisposed to embrace austerity. OMB is also expected to be a zealous advocate for the President. Continue reading →

Looking at the latest US data, business sentiment and capital spending have been eroding, and given the lagged impact of capex, that trend looks set to continue for the next few months. Against that, a number of consumer sentiment indicators remain upbeat and housing looks like it is in a firmly established uptrend, after a 5 year bear market. In fact, the existing home inventory to sales ratio is as low as it ever gets, and that is with still very depressed sales. If sales pick up further, given low inventories and with new housing starts still below the replacement rate, home prices could lurch forward.

My favorite scene from The West Wing is the episode in which the President’s press secretary is recovering from a root canal and Josh Lyman decides to handle a press briefing. Lyman is a young whiz kid who believes he is the smartest guy in the room, but the briefing goes disastrously. Lyman has to explain to the President that he has, sarcastically, told the press that the President has “a secret plan to fight inflation.” The press, fed up with Lyman’s arrogance, has decided to report Lyman’s statement about the secret plan without noting the sarcasm. Worse is still to come, for upon questioning Lyman about the incident, the President asks in exasperation: “Are you telling me that not only did you invent a secret plan to fight inflation but now you don’t support it?” Continue reading →

The principal dilemma of the progressive cause is that it has allowed a bedrock conservative premise to go so long unchallenged; indeed the progressives themselves have either overtly or implicitly agreed with the premise, making it virtually impossible for them to effectively advocate their goals:

At the invitation of the Steamboat Institute’s “Freedom Conference” I debated Dan Mitchell, an economist at Cato on Friday August 25, 2012. Dan suggested me as his debate opponent, a role we have played several times in Europe. Our primary topic was Paul Ryan’s budget policies. In the course of our debate Dan stressed an August 24 column he wrote entitled “For Once, I Hope Paul Krugman is Right.” Continue reading →

William Saletan has written a column that epitomizes the media’s bizarre infatuation with Paul Ryan. Saletan entitles his piece “Why I Love Paul Ryan.” His intro summarizes his attraction to Ryan: “He’s what a Republican should be: an honest, open-minded, solution-oriented fiscal conservative.”